Simon Malinowski, managing attorney of cannabis-focused law firm Harris Bricken’s New York office, wrote in a blog post that the language of the bill makes it clear lawmakers wanted to discourage anti-competitive behaviors.
“The legislature’s motivation for prohibiting vertical integration is woven into the language of the MRTA: to provide industry newcomers – especially social and economic equity applicants — a better chance to thrive, while also preventing monopolies,” he wrote.
Exceptions to the Rule
The bill does, however, grant some key exceptions to the vertical integration ban. Microbusinesses, which have yet to be defined, can be vertically integrated, as can existing medical marijuana operators in the state. Many of the 10 medical marijuana operators in New York are multistate operators (MSOs) and include some of the biggest names in the U.S. Existing operators include Acreage Holdings, Columbia Care, Cresco Labs, Curaleaf, family-owned Etain Health, Green Thumb Industries, iAnthus Capital, MedMen, PharmaCann, and Vireo Health.
“The New York lawmakers want to make an extremely competitive system but at the same time they're giving the existing operators a nice head start,” said Stifel Analyst Andrew Carter.
In addition to the vertical integration ban exemption, medical marijuana operators are permitted to double the number of medical dispensaries they operate from four to eight, provided the first two additional dispensaries are located in underserved areas, and they can operate three adult-use dispensaries with existing medical marijuana locations. New operators in the market are capped at three total stores.
“It's a great first mover advantage that they potentially have. The question will be how fast the competing licenses kind of get issued,” Carter added. “Right now, just the way the law is, they are extremely well positioned with the current environment -- I mean, the head start, and they already have of course the capital advantage relative to the other operators.”